Crown Castle reports progress amid fight over future

Crown Castle officials said the cell tower giant is in discussions with "multiple parties" over the sale of its fiber and small cell businesses. But the company's founder believes he and his supporters are in a better position to take Crown Castle into the future.

Ted Miller co-founded Crown Castle in 1994 and was the company's CEO until 2001. Now he's pushing four nominees to the company's board of directors alongside a plan to sell the company's fiber business and overhaul its operations.

But Crown Castle's current management team is not interested. "Mr. Miller has never had direct experience operating a business of our current size in the face of changing industry dynamics that have developed over the last two decades since his departure from the company," Crown Castle wrote in March in a lengthy rebuttal to Miller's plan.

Miller remains undeterred. 

Crown Castle's board, he told Light Reading, has a "lack of governance principles."

Miller argued that Crown Castle's expensive foray into fiber network ownership was ill-conceived and unnecessary. "I didn't understand why they needed it," he said of Crown Castle's fiber acquisitions. By owning fiber, "they were competing against their primary customers," which are wireless network operators, he said. Indeed, both AT&T and Verizon continue to expand the reach of their own fiber networks.

However, Miller said Crown Castle's small cell strategy makes sense. "There's nothing wrong with small cells. That will be part of our strategy moving forward," he said. Crown Castle operates more than 100,000 small cells today, most of which sit atop its fiber holdings.

But Miller explained that he believes Crown Castle will need to sell those small cells alongside its fiber network, in part because of contractual issues and in part to attract suitable buyers. "You've got to combine the two," he said.

The sales process

Some of Crown Castle's leadership isn't so sure about that.

"We have recently engaged with multiple parties who have expressed interest in a potential transaction involving all or part of our fiber business," said Robert Bartolo, chairman of the Crown Castle board of directors, during the company's quarterly earnings call this week, according to Seeking Alpha.

In response to questions, Bartolo said Crown Castle is looking at a variety of transactions, including selling a partial stake in its fiber business or its small cell business. "We would sell some portion of either the entire business or one of the two segments of the business. So I'm not going to rule anything out," he said.

He continued: "One of the learnings is that those businesses can be separated out. And so that increases our alternatives and informs our view as we progress through the strategic review."

However, Bartolo and other Crown Castle officials declined to provide any further details about the company's ongoing review of its fiber business or say when the company expects the effort to be finished.

Unlike big cell towers, small cells typically sit atop rooftops or light poles and provide localized cellular coverage. According to a new report from the Wireless Infrastructure Association (WIA) trade group, there are 202,100 outdoor small cells and 775,800 indoor small cell nodes across the US.

Miller, the Crown Castle co-founder, believes small cells will play an important role in the wireless industry's future. Crown Castle's annual shareholder meeting is scheduled for May 22, at which shareholders will vote on Miller's proposals.

The quarter

Overall, Crown Castle reported quarterly results mostly in line with expectations, including earnings of around $1.04 billion, slightly lower than the $1.10 billion it reported in the same quarter a year ago. Crown Castle's shares remained relatively unchanged after the company's earnings report, hovering around $92 per share. The company's shares have declined almost 20% since the start of 2024.

Crown Castle recently appointed Steven Moskowitz, a former American Tower executive, as its new CEO in an effort to strengthen its position. 

Financial analysts generally remained upbeat following the release of Crown Castle's quarterly report. "We think Crown Castle indicated interested parties for the Fiber/Small Cell segment, and we felt commentary suggested the strategic review would result in the assets being sold, one way or another," wrote the financial analysts at KeyBanc Capital Markets in a note to investors Wednesday. "We believe if that segment is sold, the Tower segment should trade at a premium to peers. However, nothing has been decided, and we still need to work through a weak leasing environment with uncertain trajectory in 2025."

"The tone of the discussion was very upbeat," wrote the financial analysts at MoffettNathanson in a note to investors following Crown Castle's earnings conference call. "We would caution readers against inferring too much about management's ability to change the trajectory of the underlying tower business. So long as they're competently run, tower operators have little influence over customer leasing and revenue growth, leaving operating efficiency and capital allocation as areas over which management can make a real difference. Crown Castle has opportunities on both fronts, but the market-implied value of the fiber segment and the time it would take for capital allocation changes related to small cells to roll through dampen our view of just how impactful that component of the opportunity might be."